OK
Please forgive but as we all know that PF has to be deducted up to minimum wages scale. So is there any loop hole to this?
Some of the ways i thought might be useful.
i) Yearly bonus instead of allowances.
ii) If the agreement is made between the employer and the employee so that the PF liability be reduced.
Thanks.
(if there is any suggestions please post)
From India, Phagwara
19Please forgive but as we all know that PF has to be deducted up to minimum wages scale. So is there any loop hole to this?
Some of the ways i thought might be useful.
i) Yearly bonus instead of allowances.
ii) If the agreement is made between the employer and the employee so that the PF liability be reduced.
Thanks.
(if there is any suggestions please post)
From India, Phagwara
Any such agreement will be null and void You will have to,pay pf and penalty with interest
From India, Mumbai
From India, Mumbai
why it will null and void actually it is stated in the Section itself.
Section 2(b) of the EPF act states that "basic wages" means all emoluments which are earned by an employee while on duty or [on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him.
It says accordance with the terms of the contract of employment. There is also a judgement regarding it. (If i found it, would post it asap).
From India, Phagwara
Section 2(b) of the EPF act states that "basic wages" means all emoluments which are earned by an employee while on duty or [on leave or on holidays with wages in either case] in accordance with the terms of the contract of employment and which are paid or payable in cash to him.
It says accordance with the terms of the contract of employment. There is also a judgement regarding it. (If i found it, would post it asap).
From India, Phagwara
Any agreement that is made to defeat statutory requirements are null and void.
Any court will strike down such arrangements.
That is the general doctrin.
According to terms of employment does not mean you can put a term saying I will pay you zero basic and pay everything as travel allowance (taking an extreme example). It means that all payments that is due to the employee under his terms of employment, whether paid or not (butnduento him) will be subject to pf
From India, Mumbai
Any court will strike down such arrangements.
That is the general doctrin.
According to terms of employment does not mean you can put a term saying I will pay you zero basic and pay everything as travel allowance (taking an extreme example). It means that all payments that is due to the employee under his terms of employment, whether paid or not (butnduento him) will be subject to pf
From India, Mumbai
You are right on the first part that any contract which defeat statutory requirements are null and void. That is the law
Now the 2nd part i am not saying that, what i mean is if term of employment does not cover any expenses or other(cash benefits), then it can not be taken as the part of salary and thus no PF is liable to be paid on it.
From India, Phagwara
Now the 2nd part i am not saying that, what i mean is if term of employment does not cover any expenses or other(cash benefits), then it can not be taken as the part of salary and thus no PF is liable to be paid on it.
From India, Phagwara
Dear, The concept of Basic Wages for a particular post or job is based on the sound reasoning that Basic Wages is the remuneration that an employee is worth for, for that particular post or job assigned. To maintain its worth in tack due to rise in cost index, the concept of D.A. is introduced. The EPF Act provides for compulsorily making contribution on the Basic Pay plus D.A. of the employee subject to his falling within the wage limit of Rs. 6500/-p.m. Hence when the prescribed Minimum Wages is less or equal to Rs. 6500/-, the P.F. Deptt. insists on payment of EPF contribution on Minimum Wages because firstly, the logic of fixation of Minimum Wages and Basic Wages are governed by the same principles, specially that an employee's worth for a particular job cannot be less than the Minimum Wages prescribed for that category by the State Govt.and secondly the EPF savings at prescribed percentage of Basic Wages plus DA would maintain the real value of savings as and when DA increases which is part of Minimum Wages. Though the Hon'ble High Court has kept in abeyance the notification of the EPF Deptt.to this effect, yet any mutual agreement contrary to the spirit of the EPF Act is bound to be termed as not enforceable under the law.
S.C. Verma, Labour Law Consultant
From India, Chandigarh
S.C. Verma, Labour Law Consultant
From India, Chandigarh
Verma Ji,
You are right and logical, but you also know that a large number of industries does not pay minimum wages to the employees and there is no provision of minimum wage defined in the EPF act. Though there are some judgments regarding that has been passed.
Now the last part of your "reply" as mutual agreement contrary to any Act would be "ultra virus". But it is not what i am saying as said earlier, "if term of employment does not cover any expenses or other(cash benefits), then it can not be taken as the part of salary and thus no PF is liable to be paid on it."
And then now what if all the allowances be given as bonus (yearly, half yearly quarterly).
Atom.
From India, Phagwara
You are right and logical, but you also know that a large number of industries does not pay minimum wages to the employees and there is no provision of minimum wage defined in the EPF act. Though there are some judgments regarding that has been passed.
Now the last part of your "reply" as mutual agreement contrary to any Act would be "ultra virus". But it is not what i am saying as said earlier, "if term of employment does not cover any expenses or other(cash benefits), then it can not be taken as the part of salary and thus no PF is liable to be paid on it."
And then now what if all the allowances be given as bonus (yearly, half yearly quarterly).
Atom.
From India, Phagwara
Sir,
As per the Hon'ble Supreme Court ruling, what is not paid to all the employees in an Establishment and what is generally not paid in all the industries cannot be termed as Basic Wages to attract P.F. contribution. Therefore your quotation in red is correct to the extent that the employee should not have earned the amount in his hand out of his service condition, like providing free/subsidised transportation, meals etc which an Estt. incur on its own. If the employer is bound to pay the allowances as a part of service condition of an employee at the prescribed rates/amount, though they are worked out yearly, half yearly or quarterly and by including those allowances, an employee cannot be excluded from the coverage under EPF scheme, the employer can be made liable to contribute to EPF.
S.C. Verma
From India, Chandigarh
As per the Hon'ble Supreme Court ruling, what is not paid to all the employees in an Establishment and what is generally not paid in all the industries cannot be termed as Basic Wages to attract P.F. contribution. Therefore your quotation in red is correct to the extent that the employee should not have earned the amount in his hand out of his service condition, like providing free/subsidised transportation, meals etc which an Estt. incur on its own. If the employer is bound to pay the allowances as a part of service condition of an employee at the prescribed rates/amount, though they are worked out yearly, half yearly or quarterly and by including those allowances, an employee cannot be excluded from the coverage under EPF scheme, the employer can be made liable to contribute to EPF.
S.C. Verma
From India, Chandigarh
I want to see the notes on financial management. Complete notes. If any video conferencing is available, let me know the same. Kindly provide necessary guidance. Thanx.
From India, New Delhi
From India, New Delhi
You are right once again, but if allowance is given as bonus to the employees then no pf liability could be made.
for example:
If a person is earning 3500/month then pf will deducted on the total salary because it is less then minimum wage. Now the as we know is divided in to basic (60%), HRA, DA, etc..(40%). Now if I say Deduct PF on 75% of the salary and show the rest as bonus or other cash benefits in the end of the financial year or half yearly.
It is the important part: if the balance sheet (as well as accounts of the company) supports the deduction then EPFO can not challenge that.(of course they can challenge but they can not prove it)
From India, Phagwara
for example:
If a person is earning 3500/month then pf will deducted on the total salary because it is less then minimum wage. Now the as we know is divided in to basic (60%), HRA, DA, etc..(40%). Now if I say Deduct PF on 75% of the salary and show the rest as bonus or other cash benefits in the end of the financial year or half yearly.
It is the important part: if the balance sheet (as well as accounts of the company) supports the deduction then EPFO can not challenge that.(of course they can challenge but they can not prove it)
From India, Phagwara
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Splitting of minimum wages for PF in abeyance (1).pdf
Minimum Wages, ESI & PF.pps